Simple Formulas to Help You Decide How Much Life Insurance You Need

| June 27, 2018

Thinking of life insurance? You should be doing your math then, too. With a few simple “rules of thumb”, and dependent on your age, you can define a solid estimate based on your loved one’s needs in the future and your current financial condition.

Formula 1: The DIME formula.
Might as well get the most detailed one outlined first, right? With the DIME formula (debt, income, mortgage, and education) these four areas are used to calculate your life insurance needs. Here’s how:

• Debt: Add together all your debts, mortgage excluded, and don’t forget to include your funeral cost estimate.
• Income: Decide the length of time your family would need financial help and multiply your current annual income by that number.
Mortgage: Calculate the amount of money needed to pay off your mortgage completely.
• Education: Finally, estimate the cost of sending your child(ren) to college.

Formula 2: Multiple your income by 10.
Simple. Just multiple your annual income by 10. It’s not as detailed of a look at your family’s needs and can be less accurate based on today’s interest rates and economy.